In 1939, the luxury British ocean liner Goliath, carrying 1,860 passengers, is hit by a torpedo fired by a German U-boat and sinks while on a trans-Atlantic crossing to the United States three days after the outbreak of World War II.

Scientists aboard a research ship discover the wreck of the Goliath in 1981 lying upright in 1,000 feet (305 m) of water.[2] Divers sent down to investigate the wreck, including oceanographer Peter Cabot (Mark Harmon), hear banging and music coming from the ship,[3] and are shocked to see the face of a beautiful young woman at a porthole (Emma Samms). They discover 337 survivors and their descendants living in an air bubble in the wreck.

The residents of Goliath, who have invented some technologies to help them survive, some not even known to the outside modern world, live in a superficially utopian society under the autocratic leadership of John McKenzie (Christopher Lee), a junior officer at the time of the sinking credited with saving a portion of the passengers and crew. The scientists are surprised to discover that McKenzie and some of the ship's residents are not interested in being "rescued", and that there are outcasts and rebels opposed to McKenzie's seemingly beneficent leadership, which also includes brutal discipline, mandatory contraception, euthanasia, and outright murder disguised as a mysterious disease.

Complicating things, the Goliath had been carrying some sensitive documents to U.S. President Roosevelt. A joint American/British military team is sent by Admiral Wiley Sloan (Eddie Albert) to retrieve and destroy the documents.